Chapter 4 Flashcards
According to Richard Straub, why do managers have a hard time coping with complexity and how do the falsely cope with it?
Richard Straub recognized that managers avoid complexity. Interconnectivity or butterfly effect wherein small actions/events can have large consequences-especially in complex systems, can be manifested in businesses.
Managers have a hard time adopting to complexity and volatile competitive environment.
Reasons managers have a hard time accepting complexity:
It’s harder to maintain control
Technology wasn’t advanced enough to handle complexities
Non- human decisions are seen as risks.
Seem to lack coherent structure
Activities are heavily intertwined
How do managers falsely cope with complexity of SC?
They simplify decision-making concepts and focus on only a part of SC
What should they do instead?
Consider interdependencies and find a good balance between attention to detail and abstract.
What is supply chain?
Supply chains are organizational structures made up from various companies that are connected through material, financial and informational flow. They are characterized by dependencies and cause and effect relationships. They require a systematic, structured and holistic approaches to decision-making.
What are the 3 key concepts defined by Seghezzi:
3 Key concept in SCM: MC, MM, MS
Management concept:
Provides a general framework to guide managers in making strategic decisions. Offer overarching principles on improving quality or manage SC efficiently.
Examples:
Total quality management
SCM
Management model: set of tools/methodologies that allow concepts to be put into practice. Provides a structure way of applying general principles into real-world business scenarios.
They need to be abstract, robust, flexible & consistent (logically sound and does not contradict itself).
Management system: unique structures and proceses a company develops based on management models and concepts. These models and concepts come to life in day-to day operations.
Companies have multiple management systems They are interdependent and interconnected with each other. These models need to work in harmony to achieve objectives.
Examples: QIERKS
Quality management systems
Information management systems
Environmental management systems
Risk management systems
Knowledge management systems
Safety management systems
What is quality control?
the continuous responsibility to drive improvement rather than just monitoring production.
What is a systemic view and which management models use systemic views?
considers interdependencies between business units (subsidiaries, departments) and whole organization ( production site, entire company). It recognizes complex network of interconnected companies.
St. Gallen management model
Chopra and Meindl decision making model on SCM
What is the St. Gallen management model?
St. Gallen management model (by Swiss scholars 1960s-70s) displays the importance of systemic views (company is part of a bigger system and management can’t be done in isolation-> consider environment, stakeholders and internal and external processes)
3 levels of planning: (needs to be balanced)
NSO-planning
Normative (align with values & long term goals)
Strategic (long-term strategies)
Operational (day-to-day operations)
Processes:
Business (production, service delivery)
Supporting (HR,IT)
Management (planning, organizing, controlling)
What is the Chopra & Meindl decision making model?
Chopra and Meindl introduced decision making model on SCM where the SC strategy is optimized to align with the company’s competitive strategy. It needs to find right balance between responsiveness and efficiency.
A systemic approach is critical.
6 key factors that affect SC: 3 Logistical drivers & 3 cross-functional drivers:
3 Logistical drivers: SIT
Storage and production facilities:
Inventories
Transportation:
3 cross-functional drivers: SIP
Sourcing (which process is handled by which company in the SC)
Information/data about inventory & costs
Pricing
(If you are selling cheap standardized product, your SC must be efficient: facilites are centralized, bulk-shipping,)
What are the similarities and differences of 2 models that use systemic view?
Similarities:
Both models emphasize that decisions aren’t isolated- they are part of a larger system of cause- and effect relationships (butterfly effect)
Differences:
St. Gallen is a general management model emphasizing on holistic, systemic approach
Chopra and Meindl is a supply chain specific model, focusing on optimizing SC to fit the company’s competitive strategy
What is the SCOR MODEL
The Supply Chain Operation Reference or SCOR model, developed in 1996 by the SCC (Supply Chain Council), is a comprehensive framework to help companies improve their SC performance.
The SCOR model provides a standardized framework for companies to describe, analyze, measure and optimize their supply chain by proposing performance attributes, metrics skills, tools and best practices for various processes.
It uses standardized language for SC activities and focuses on performance measurements across five key areas (AACRR). The model encompasses six primary management processes (PSMDRE).
Additionally, it includes process decomposition which breaks down the 6 management processes into subprocesses across multiple levels, providing detailed insights into how processes like “Make” and “Deliver” work. And it uses metric decomposition, where performance metrics at Level 1 are broken down into more detailed, actionable metrics in Level 2 and 3, to identify and address performance gaps within the SC.
The SCOR model supports decision-making at multiple levels, offering a holistic view of the entire SC from suppliers to customers across various industries.
Other important info about the SCOR model
History:
PRTM and AMR Research -> Gartner PwC
SCC-> ASCM
The SCOR model has developed overtime with the current 12.0 version released in 2017. It was established as an industry standard model for strategic supply chain management.
Benefits of SCOR Model:
Standardized language: it helps facilitate communication along the supply chain.
Standardized performance measurement: It contains a hierarchy of of metrics to describe 5 performance attributes: AACRR
Agility, Assets, Cost, Reliability, Responsiveness
Holistic view: SCOR model views the supply chain as a whole, and not just the internal processes of one company. To help understanding the roles and responsibilities of all organizations along the SC
CONS:
-Doesn’t consider socio-economic background n different regions (Infrastructure).
-Standardized best practices, but doesn’t fit all companies and make them successful
-Doesn’t consider culture, traditions, norms and values, which are great influences.
What activities can be found in the SCOR model?
Customer interactions (invoicing/ordering)
Market interactions (requirement for market research or order fulfillment)
Activities related to product (from Supplier’s Supplier or Customer’s Customer)
*activities that stimulate customer demand (marketing) is out of scope
What are the 4 levels in the SCOR model?
Level 1: Top level (management processes)
Level 2: Configuration level (process categories/types)
Level 3: Composition level (process elements)
Level 4: Implementation level (industry specific process elements-out of scope
Level 1: defines scope and overall structure of SC, using 6 primary processes and defines performance metrics or KPIs
KPIs: diagnostics of overall health of SC and support strategic decisions.
e.g.
sM= SCOR model + Make : overall management process
What are the 6 primary management processes? PSMDRE
PLAN- managing decisions about balancing supply and demand. Including collection of information (customer orders, inventory, capacities)
SOURCE- acquiring materials and services for production (order placement, receiving, payment)
MAKE- conversion of materials into finished products (assembly, repair).
DELIVER- handling customer orders (inquiry, quotes, delivery, invoicing)
RETURN- returning products from customer to producer. (Defective products, for maintenance, excess items).
Return can be related to other management processes (deliver, source, make)
ENABLE- managing data, performance, risks, network across SC
Examples of KPIs and Level 1 KPIS:
AACRR
Agility- Upside SC adaptability, Overall value at risk
Asset management efficiency- Cash to cash cycle time, Return on fixed assets/ working capital
Cost- Total SC cost, Cost if goods sold
Reliability-Perfect order fulfillment
Responsiveness-Order fulfillment cycle time
Level 2: details supply chain process types using proces categories to define process capabilities and operations strategy-(e.g. “performance diagnosis”)
Business practice:
Make -
make to stock (M1) -production based on demand projections (sodas)
make to order (M2) - production based on customer order (cars, computer)
low volume, low predictability
engineer to order (M3)- production according to customer requirements (cruise ship)
use of special equipment or machines
Level 3: configuration of processes from level 2: Specification of capabilities, inputs, outputs, skills required, performance metrics, best practices, tools
Business practice:
sM1.1 - Schedule production activities
sM1.2 - Issue material
sM1.3 - Produce & test
sM1.4 - Package
sM1.5 - Stage product
sM1.6 - Release product to deliver
sM.17 - Waste disposal
A certain process element has no related performance metrics, multiple performance metrics relate to on performance attribute.
Example of Performance metrics:
Agility - N/A
Assets- Capacity utilization
Cost- Work in progress inventory, plant level order management costs
Reliability- schedule achievement
Responsiveness- schedule production activities’ cycle time
Example of Best Practices:
Provide continuous training to employees
Real time quality control techniques
Benchmark practices
Paperless production control
Level 4: Implementation and improvement of specific processes in detail according to competitive needs of certain company.
What are the Process types in the SCOR model?
Planning: linked to Plan process, processes to harmonize current resources with expected demand requirements, processes related to sales or capacity planning
Execution: linked to Source, Make, Deliver, Return, processes triggered by demand and affect condition of item (material, semi-finished good, finished product)
Enable: linked to Planning and Execution, processes that manage, maintain, prepare information/ relationship necessary for Planning and Execution, e.g. choosing a new supplier- gathering info about potential suppliers and preparing for new relationship.
What is process decomposition and metric decomposition?
Process decomposition: breaking down the 6 primary management processes into sub-processes across multiple levels
Metric decomposition: breaking down performance metrics from Level I into detailed, actionable metrics at Level 2 and 3
